Six months after the U.K. government scrambled to launch new bailout measures for Britain's foundering banks and economy, several of those efforts are languishing with few takers.
In January, for example, the British government created a guarantee program meant to revive the dormant market for asset-backed securities. The program aims to spur purchases of banks' asset-back securities, or bundled consumer loans, by guaranteeing them for buyers.
The guarantees were made available in April, but since then, none of the major U.K. banks has issued a security with such a guarantee. Bankers say it is too expensive; the government says the program is under review. So far, no changes to its terms have been made, and the program is set to expire in October.
The flop is among several misfires by the U.K. government in recent months among programs that haven't drawn interest from the banks and businesses they were intended to help. An effort to give firms trade insurance, for example, has seen only limited participation. The same is true of a loan guarantee for small businesses, which has been disregarded because it requires owners to put their own collateral on the line.
The snubbed bailout programs are a testament to the difficult balancing act governments face when attempting to aid their financial sectors and economies: They don't want to give banks and businesses a free ride, but fail to accomplish anything if their terms are not attractive enough.
It's worth reading the article in full, because you can be sure that's what a lot of potential investors in the UK will be doing. I don't think it will be encouraging them to put their money into this country. I've said all along that restoring economic confidence is the main task of the government, as few people will want to risk their money in an economy which looks risky. The level of deficit spending is another factor in a potential investor's decision. Many still believe that our credit rating is in danger. If we lose our triple AAA rating then all bets will be off. It hardly bears thinking about.